"Gender Fund" : creating a virtual mutual fund investing in firms with gender diversity

Abstract

"Companies with more women board directors experience higher financial performance" (Bottom Line report from Catalyst). This shows that gender diversity at the board level is a hot topic. In October 2014, Credit Suisse came to similar conclusions; "Diversity is in focus today, not just for equality and governance priorities, but for the benefits for companies and shareholders"¹. During a financial research project sponsored by Acadian Asset Management² our team of 3 people investigated whether these conclusions were reliable. We adopted an approach comparing portfolios with at least one woman on board to portfolios with no women on board. However, our results on average did not show much evidence of a statistically significant correlation between performance and gender diversity at board level. On the one hand, one could argue that a portfolio manager hardly ever gets statistically significant results that his or her strategy will work. S/He always has to make a bet at some point and trust his or her instinct. On the other hand, one could wonder whether the number of women on board is the right metric for gender diversity within a firm. Indeed, depending on which board committee these women are on, they have more or less impact. Sometimes they might just be figureheads rather than decision makers and sometimes the board itself may just be an echo of the CEO's decisions.